Bailout seems to be the catchword of the day. This year, we’ve already seen billions of dollars spent on bailouts and now, the Bush administration’s Treasury Secretary Henry Paulson is seeking – as “quickly and cleanly†as possible — $700 billion (yes, that is a b) in what would be the largest bailout in history. We are, it appears, fully engaged in bailout madness, complete bailout insanity, something that is going to affect every American, perhaps even for years to come.
The Year’s Most Impressive Bailouts (So Far)
On September 21, 2008, The International Herald Tribune published a list of government bailouts taking place during the past 100 years. There have been some very impressive bailouts this year, such as the $85 billion “emergency loan†for American International Group Inc., which garnered the government “a 79.9 percent stake in AIG,†the biggest insurance company in the world, according to the International Herald Tribune article.
Some of the other bailouts of 2008 on the International Herald Tribune published list, so far, include the Treasury Department taking over Fannie Mae and Freddie Mac, “temporarily putting them in a government conservatorship with plans to inject up to $100 billion into each,†and the Federal Reserve’s decision to “guarantee $29 billion of Bear Stearns’ assets in connection with the government-sponsored sale of the investment bank to JPMorgan Chase & Co.†And, now Treasury Secretary Henry Paulson wants a “quick and clean†$700 billion and the power to “buy up mortgage-related assets from American based companies and foreign firms with a big exposure to these illiquid assets,†according to a report published on CNNMoney.com on September 21, 2008.
The Paulson Plan For A Bailout Of Epic Proportions
“As we’ve said for some time, the root cause for the stress in the capital markets is the real estate correction and what’s going on in terms of the price declines in real estate,” said Paulson, according to a report published by CNBC on September 18, 2008. “We’re coming together to work on an expeditious solution, which is aimed right at the heart of this problem, which is illiquid assets on financial institutions’ balance sheets.”
At the center of this “expeditious solution†is $700 billion, which will, if the bill becomes law, be allotted for Paulson to, as reported by Bloomberg.com on September 21, 2008, “buy home loans, mortgage-backed securities, commercial mortgage- related assets and, after consultation with the Federal Reserve chairman, “other assets, as deemed necessary to effectively stabilize financial markets,” the Treasury said in a statement.â€
In addition, according to Bloomberg.com, “the bill would prevent courts from reviewing actions taken under its authority.†Paulson would basically have “unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.â€
Interestingly, according to a report published on Politico.com, and confirmed by Paulson in an appearance on “This Week†on ABC, foreign banks will be eligible for bailout assistance as well. “That’s a distinction without a difference to the American people. The key here is protecting the system,†said Paulson. “…The American people don’t care who owns the financial institution.â€
If the Paulson plan becomes law, it will require a dramatic increase in the national debt ceiling to accommodate the amount that will be spent on this bailout. The current national debt is $10.615 trillion. Paulson’s plan will include raising it to $11.315 trillion.
What These Sorts Of Bailouts Mean To You
In an agency fact sheet about the proposed bill, Paulson states that this $700 billion bailout for the purpose of buying bad loans and other fiscal muck choking the financial industries is designed to “…to promote market stability, and help protect American families and the U.S. economy,” according to an article published on CommonDreams.org. That seems to be a seriously skewed perspective, particularly when considering the facts of the matter.
How protected will families feel, families already facing a myriad of economic pressures and problems, when they find out that this recent bout of bailout madness is going to cost them serious money? According to a recent Reuters report, this $700 billion bailout will cost “every man, woman and child in the United States†over $2,000. But, that’s not all. The article went on to point out that “The administration and Federal Reserve have already taken several other emergency steps to try to prevent growing credit strains from engulfing the entire financial system and economy. A $700 billion fund would push the total pledged to combat the crisis to $1.8 trillion, or $15,000 per U.S. household.â€
The American dollar is already struggling, and has been dropping in value long before this round of bailouts. Trillions of dollars in debt already, many believe that there is only one way the US is going to be able to take on still more debt to fund yet another bailout, a bailout larger than any other in US history. The Christian Science Monitor, in an article dated September 23, 2008, made mention of an article written by Alex Patelis, a London-based economist at Merrill Lynch, with the headline “As the US printing press starts.â€
Paris-based financial analyst Max Keiser, in an interview with Press TV, said that “To pay for all this insanity from Hank Paulson, they have two options. They can either raise taxes or they can inflate the money supply. They can destroy these things US dollars [waves a dollar bill at the camera]. Dollars 30 years ago used to be backed by this stuff – gold [waves a gold coin at the camera]. Now thanks to Hank Paulson and Ben Bernanke US dollars are backed by these – bananas [waves a banana at the camera]. They’re absolutely worthless. Anyone buying US dollars today is going to lose money.”
Keiser, as have many other economists and financial experts, also stated that there is a significant chance of an inflationary depression. Because of the degree to which the money supply will have to be expanded to come up with the means of funding these bailouts, there’s even the potential for hyperinflation. Keiser also mentioned that food and oil prices can be expected to soar. Coincidently, or maybe not, according to a September 22, 2008, CNNMoney.com report, “Oil prices posted the biggest one-day dollar gain ever Monday as the dollar was punished by the government’s $700 billion Wall Street bailout plan and big investors scrambled to fill obligations as the October contract expired.â€
The bottom line of all of this bailout madness is that, while you struggle to manage your own debts, mortgage, and other financial obligations and essentials, the government is going to take money away from you and your family to cover the losses of Wall Street and the biggest players and profiteers in the financial world. The government will run the risk of degrading the currency even further than their policies already have, adding considerably to the expenses of your day-to-day life. It will even run the risk of catapulting the US into a depression. This bill hardly seems as though it is designed to protect American families and the US economy upon which they rely, but rather seems to be all about what so many others have said – privatizing profit and socializing losses for the politically connected and financially elite classes.
5 users commented in " Bailout Madness – What It Means To You "
Follow-up comment rss or Leave a TrackbackScrew the elite class.
I want to work for cash.
This article is right on point.
The same happened in mexico a few years ago. It was called Fobaproa. We, taxpayers, will be paying back for generations.
The U.S. banks have fleeced the little guy for at least 2 decades. The signs of greed and corruption started in the 80’s. The S&L collapse, and not the sub-prime Mortgage collapse are the big picture. Here’s the little picture of stealing from their customers. In no other business, has an industry pinched the poor and Main St. American than this. Three Examples:
1) Charging for use of ATM’s. The banks save billions of dollars in staff expenses and office overhead. They would have had to hire a hundred thousands of tellers and opened thousands of offices to handle banking needs of the last 2 decades. Instead, for the cost of running their computers, and putting up machines, they are dispensing/collecting money in without hiring employees. For this, they CHARGE THE CUSTOMER, a transaction fee. It should have been made illegal the minute it was conceived. Some charge as much as three dollars. This is fleecing. 2) No or little interest on savings accounts. The banks are so greedy, they give nothing to the depositors for the “safety” of holding and investing the depositors’ money. No one is motivated to save in a bank in America. 3) Bounced check charges. BofA is a good example of abuse of the customer: They charge a whopping THIRTYFIVE dollars/bounced check. They don’t take the checks in order of submittal, but rather in order of size. That way the largest check bounced removes all funds, and the next, previously dated checks, have to bounce. In the customers mind, they might be bouncing one check. But after BofA rearranges the withdrawal times, the customer can accrue HUNDREDS of dollars because of an accounting mistake. 4) Deposit of funds. Banks hold checks that aren’t on their own funds, out-of-state (in the same bank), and have time limit rules of 4pm. All of these are to freeze the customers’ money while they are investing that money. There is no “freeze” on money from out of state, with electronic banking. a 2 or three day hold on a check is a game. Banks have been screwing the poor and middle class in America for years. Now they’re going for the big screw. I say, let them put up collateral for the loans, in the name of the American taxpayer, and give the profit back to the taxpayer until they are paid up. Screw the banks as they have gouged us. Or let them collapse.
REMEMBER……THESE ARE THE SAME BANKS THAT PAID 100+ MILLION DOLLARS TO LOBBY CONGRESS IN 2002 TO MAKE IT VIRTUALLY IMPOSSIBLE FOR THE AVERAGE PERSON TO GET A CLEAN CHAPTER 7. WHEN THE REVOLUTION COMES LETS MAKE SURE IT’S THEIR “ROYAL” BLOOD IN THE STREET.
Banks made CRAZY loans simply to collect the hundreds of billions in percentage up-front-fees for originating the loans. These same people have not reformed their practices or changed their ways. All senior management of these intitutions should be forced to resign and give back a large portion of their personal fortunes as a condition of the bailout. Instead, we are paying for their continuing greed.
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